Williams-Sonoma (WSM) Is Strong On High Volume Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Williams-Sonoma ( WSM) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Williams-Sonoma as such a stock due to the following factors:

WSM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $108.4 million.

WSM has traded 723,443 shares today.

WSM is trading at 26.23 times the normal volume for the stock at this time of day.

WSM is trading at a new high 9.03% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

Williams-Sonoma Inc. operates as a multi-channel specialty retailer of home products. The company operates in two segments, Direct-to-Customer and Retail. The stock currently has a dividend yield of 1.9%. WSM has a PE ratio of 23.7. Currently there are 9 analysts that rate Williams-Sonoma a buy, no analysts rate it a sell, and 14 rate it a hold.

The average volume for Williams-Sonoma has been 1.4 million shares per day over the past 30 days. Williams-Sonoma has a market cap of $6.5 billion and is part of the services sector and retail industry. The stock has a beta of 0.78 and a short float of 5% with 3.25 days to cover. Shares are up 19.1% year-to-date as of the close of trading on Wednesday.

TheStreet Quant Ratings rates Williams-Sonoma as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

WSM's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

WILLIAMS-SONOMA INC has improved earnings per share by 8.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WILLIAMS-SONOMA INC increased its bottom line by earning $2.85 versus $2.56 in the prior year. This year, the market expects an improvement in earnings ($3.17 versus $2.85).

WSM's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, WILLIAMS-SONOMA INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.

The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.